The Form 14654 (2024) IRS Certification for U.S. Persons

Form 14654 (2023) IRS Certification for U.S. Persons for SDOP

Form 14654 and 14653 (IRS Streamlined Offshore Procedures)

The Streamlined Offshore Procedures is a program developed by the IRS to allow non-willful Taxpayers to safely disclose their previously unreported foreign accounts, assets, investments, and income. When it comes to submitting to the Streamlined Domestic Offshore Procedures or Streamlined Foreign Offshore Procedures, one of the most important parts of the submission process is preparing the non-willful certification form — IRS Form 14654 (SDOP) or IRS Form 14653 (SFOP). The non-willful certification form is required to be included as part of the streamlined submission package. And, while the stand-alone streamlined procedures have been around for nearly 10 years, the certification form has remained relatively constant during that time. Let’s look at seven (7) important facts about making a streamlined submission.

The Three Most Recent Tax Years That Have Passed

When submitting to the Streamline Procedures, the Internal Revenue Service requires that taxpayers submit tax returns for the three prior years (that have already passed, including extensions). Depending on whether the Taxpayer submits to Streamlined Foreign or Streamlined Domestic will determine if they are limited to submitting amended returns (SDOP) or if they can submit original returns as well (SFOP).

Year-End Balance, Not Maximum Balance

For the Streamlined Domestic Offshore Procedures, taxpayers must calculate a 5% Title 26 Miscellaneous Offshore Penalty. It is important to note, that the penalty is based on the year-end value and not the maximum value throughout the year. Likewise, not all foreign accounts and assets are subject to the penalty — so taxpayers should be aware of which assets should not be included in their computation before making their submission, since certain foreign rental properties and Canadian pension plans are excluded from the penalty base.

Taxpayers Must be Non-Willful

Taxpayers can only submit to the Streamlined Procedures if they are non-willful. It is very important that taxpayers who are willful do not try to sneak into the streamlined program thinking they can put one past the IRS. In recent years, the IRS has increased the number of audits and investigations of taxpayers that they believe are willful, and in fact, have prosecuted taxpayers who they determined to have made intentional misrepresentations about non-willfulness in their narrative statement.

Narrative Statements Should be Concise and Accurate

When writing the 14653/14654 certification narrative, taxpayers should try to keep it as clear and concise as possible. It is important that taxpayers paint an accurate picture summarizing their non-willfulness — without writing a 30-page dissertation. 

The IRS can Still Audit Taxpayers for Prior Years

Just because a taxpayer submits to the Streamlined Procedures does not mean the IRS loses the opportunity to audit the Taxpayer for the tax years that are within the streamlined compliance submission period. Unlike the IRS Voluntary Disclosure Program in which the matter closes at the end of the submission process — and taxpayers receive a 906 ‘closing’ letter — when it comes to the Streamlined Offshore Procedures, the IRS can audit the taxpayer’s submission after it has been submitted (and even preliminarily accepted). In fact, sometimes the IRS can even go back to audit/examine an additional three years of tax returns depending on the facts and circumstances of the non-compliance.

Taxpayers Cannot Claim a Refund for the Penalty

The 5% penalty is nonrefundable. In other words, once a taxpayer submits to the Streamlined Procedures and pays the 5% penalty under the domestic version of the program (there is no offshore penalty under the ‘foreign resident’ version of the program aka SFOP) they cannot later apply to get that penalty refunded.

The Certification Form Does Not Form a Binding Contract with the IRS

In a recent case, a Taxpayer took the position that the IRS was not able to audit the Taxpayer after their streamlined submission was initially accepted by the IRS — because having the IRS initially approve the submission, amounted to a contract being formed for non-willfulness between the Taxpayer and IRS. The IRS did not agree with Taxpayer’s position, and neither did the court. Thus, just because a taxpayer submits to the Streamline Procedures does not mean that the IRS is estopped from auditing the taxpayer or disputing their non-willfulness claims. 

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Law Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.